Vol. 612 No. 2
49 Mr. Bruton asked the Minister for Finance if he has estimated the impact of a one per cent increase in interest rates on business and on personal repayments; if this will fall disproportionately on recently formed families; and if he will make a statement on the matter. [39233/05]
As the Deputy will be aware, there is a broad range of factors that determine the effect of changes in interest rates on individual loan repayments. These include, for example, the outstanding loan amount, whether the lending rate is fixed or variable, the length of time over which the increase takes place, the pass-through of interest rate changes to lending rates, the repayment term and the specific nature of the financial product involved. My Department, having consulted the Central Bank, has concluded that, as detailed information relating to all these factors is not available, an accurate estimate of the figure requested by the Deputy cannot be constructed.
In reviewing the broad impact of any projected increases in interest rates on households and businesses, account must also be taken of private sector savings levels as any increase in interest rates will obviously have beneficial effects for savers. In addition, in assessing the overall financial position of both businesses and consumers following interest rate changes, it is too narrow an approach to consider the level of indebtedness in isolation from the asset side of the private sector's balance sheet. A high proportion of household indebtedness in Ireland relates to borrowing for house purchase which, in turn, creates an asset for households. In the same way, borrowing by the business sector underpins high investment levels and the creation of business assets yielding future income.
As far as the position of recently-formed families is concerned, the Central Bank's recently published Financial Stability Report concludes that fundamental factors, such as increasing employment and incomes, low inflation and interest rates, have underpinned the pattern of mortgage growth and associated debt levels in the economy. The maintenance of Ireland’s strong economic performance and, in particular, its strong income and employment growth, provides a positive and supportive economic environment within which households can successfully manage their finances.
Is the Minister concerned about the rate of growth in indebtedness? The latest figures show that in the past 12 months alone, private sector indebtedness went up by €55 billion. That is more than the Minister spent in his entire budget this year. The rate of private sector borrowing is now 190% of GNP. In commenting on the past, the Minister has often said that when public sector borrowing was 120% of GNP we were in a precarious situation. What is the Minister's response to the Central Bank when it says that the most worrying aspect of private sector indebtedness patterns is the accelerating speed at with debt is increasing in the context of an already high level of indebtedness? Is the Minister aware that our private sector indebtedness is now the highest in Europe? It is almost double the European average. Does he agree that even a 1% increase in interest rates would wipe out all the benefits of concessions in the budget and elsewhere? Half of our mortgage lending has occurred in the past 24 months. Does that not mean that many young couples have entered into debt commitments that are quite precarious for them against a current background of rising interest rates?
While current levels of credit growth could become a cause for concern were they to continue, I do not believe current levels of indebtedness represent a danger to the economy. In fact, it is to be expected that consumers would seek to make use of historically low interest rate levels. It is also a fact that Ireland has traditionally had low levels of personal debt in comparison to other EU countries. I should also point out that credit has an essential role to play in any functioning economy, allowing households to smooth consumption over time if disposable income is subject to shocks.
It is important to remember that while personal liabilities have increased these are backed by real assets. In this context a major element of outstanding indebtedness is accounted for by residential mortgages. Demand for residential mortgages is underpinned by a number of factors, including strong new housing output, growth in the economy, the accompanying pick-up in employment creation, the increase in household formation, significant net immigration, lower public sector indebtedness which facilitated easier fiscal conditions, and the decline in average inflation over several years.
At an individual level, it is important that borrowers act sensibly. I agree with the Central Bank which recently reiterated the importance of prudent behaviour both by borrowers and lenders. The possibility that interest rates may rise over the medium term with obvious implications for the burden of repayments, should be kept firmly in mind. Insofar as the banking sector is concerned, the Central Bank in its recent Financial Stability Review concluded that the Irish banking system is in a good state of health and is reasonably well placed to cope with any adverse short or medium-term developments.
The Minister is just reading out a prepared answer. The Central Bank said there were three major threats to us. One is a decline in the construction industry and another is the rapid growth in our private sector indebtedness.
The Deputy should put a brief question because we are almost out of time for this matter.
It also remarks that, in the past, where countries got into trouble, it was through very intense, debt-driven property booms, stating that it was a concern. At what point do the three threats of declining exports, rising indebtedness and risks in the construction industry cause concern, and when must a Minister for Finance produce a policy response? We ought to be planning to deal with this issue, which is now a serious concern.
I will allow the Minister a brief final reply.
The fact that I am reading my replies testifies to the accuracy with which I have anticipated the supplementaries. This is for information and not to allow the Deputy to joust with me regarding interest rates. It is about putting on the record the facts of the situation, and I have quoted from Central Bank reports.
The Minister said that we had low indebtedness, and I quoted figures to him showing that we are by far the worst in Europe.
We are only now reaching European levels of debt.
We are not.
Yes, we are.
The Minister should read the Central Bank reports.
I have already done so. Economic prospects for the Irish economy, despite the Deputy's best efforts to suggest otherwise, remain very positive, notwithstanding the increased uncertaintly evident in the international economy.
Let us move on to Question No. 50.
Perhaps I might answer quickly. There is broad consensus among commentators that the Irish economy is set to continue to perform strongly, expanding close to its growth potential both this year and next. Over the medium term, the economy is expected to grow at almost double the rate forecast for the eurozone overall. The pace at which new housing output adjusts downwards to long-term, sustainable levels is an important risk for the economy, and new housing completions are projected to decline by 2.5% next year and 5% in 2007 and 2008. That will be offset by investment in other building and construction, including a significant increase in spending on the public capital programme. That is the level of economic activity that we predict, and we therefore anticipate a soft landing. We envisage that the issue will be dealt with in a planned way over a period owing to demographic, employment and other factors that differ greatly from those in other European economies and this means that housing output is justified.
50 Ms Burton asked the Minister for Finance if, in view of figures showing that fewer than one in nine civil servants wish to move with their jobs under the Government’s decentralisation programme, his plans to review or adjust the programme; and if he will make a statement on the matter. [39249/05]
I have no plans to change the scale or scope of the decentralisation programme. There have been approximately 10,600 applications for decentralisation so far. New applications are being received every week. For the past 14 months since the closing of the priority application period in September 2004, an average of 100 new applications have been received every month. I have no reason to believe that the rate of application will lessen as the central applications facility, CAF, remains open and continues to accept further new applications.
Using the statistic that few civil servants are moving with their posts is not accurate. It assumes that no one will move between Civil Service organisations. A career in the Civil Service for most people will encompass service in several Departments and different posts within those Departments. Many Civil Service organisations have a formally agreed mobility policy whereby people move post every five years or so.
Many civil servants have already transferred across Departments to decentralising posts in advance of transfers out of Dublin over the coming years. To date, more than 900 of the 7,200 civil servants are in place, over 30% of whom are in middle management and higher level grades.
To give the Deputy an example of how well the transfer system within Civil Service organisations works, I remind her of the information given by the Revenue Commissioners to the Joint Oireachtas Committee on Finance and the Public Service last year. The Revenue Commissioners set up decentralised offices with 900 staff in the mid-west in the early 1990s. At the time, 10% to 12% of staff in the Collector General's office opted to relocate. If staff who were employed in other Revenue posts are included, that figure increases to 25%. As a result, 75% of decentralising staff were new to the Revenue organisation. The Revenue Commissioners looked on that as an opportunity to examine its internal efficiency. As a result of that exercise, significant improvements were made to processes, systems and work practices which were implemented in the course of decentralisation.
As the Deputy knows, the Collector General's office was decentralised without loss of efficiency or effectiveness, and it has risen to all the business challenges that have emerged in the past decade. I expect that Revenue's experience can be replicated in the current decentralisation process.
Does the Minister have any concerns, particularly regarding specialist agencies due to decentralise? I wish to mention two specifically, the first being the Development Co-operation Ireland division of the Department of Foreign Affairs. According to documentation released to me under the Freedom of Information Act 1997, no senior diplomats serving in that section and no senior specialists in foreign aid are willing to decentralise to Limerick. One must remember that they must also move regularly to take up posts in the rest of the world as Department of Foreign Affairs employees. Does the Minister share the fears expressed in the risk assessment regarding that section that the decentralisation process as planned, particularly by the Minister's colleague, the Minister of State, Deputy Parlon, will be "catastrophic", to quote the paper? This comes at a time, next year and the year after, when the Government is increasing development aid spending by €100 million per annum. The total will rise to approximately €600 million next year and continue to rise every year after.
FÁS information shows that six people out of 400 from that organisation's headquarters, many of whom are highly trained specialists, are willing to move. The Labour Party seeks a review of the implementation process. Is the Minister concerned enough to examine areas where there are significant problems regarding damage to the public service and to carry out an appropriate review?
As I said, the central applications facility has received approximately 10,600 applications. The breakdown between city and country is approximately 50-50. The latest progress report from the decentralisation implementation group, which is charged with advancing this Government initiative, came to us at the end of June 2005. We hope that, by the end of next year or early 2007, up to 1,000 staff will be in situ in decentralised locations. There are already 900 sitting behind desks in preparation and training for the move they will make. It is hoped beyond that, despite the challenges, to move another 2,000 by the end of 2007, giving a total of up to 3,000. That is the most recent progress report of the decentralisation implementation group. There are issues regarding the general service. We have had a successful culture of decentralisation before in the public service and we can draw on that experience and proceed fairly well.
There are three other broad areas that must be addressed. Regarding information and communications technology, particularly in the Revenue, the Department of Social and Family Affairs and the Department of Agriculture and Food, there is the question of analysing current applications and working with management and trade unions on proposals to fill shortfalls. That issue is ongoing as we continue with the simpler aspect of the task, namely, transferring general service people to decentralised locations, as was done in smaller-scale initiatives in the past.
Engagement with the trade unions is taking place regarding professional and technical staff, such as engineers, quantity surveyors in the Office of Public Works and environmental experts whom the Deputy mentioned regarding development co-operation. That will be a more difficult situation than with the general service, but we must sit down and work through the issues with professional and technical staff to see how we might proceed.
A third issue concerns the State-sponsored bodies where there has been less of a culture of relocation hitherto. People from the line Departments, the agencies and the trade unions have met to see how we might be able to introduce initiatives to ameliorate that situation. In that general context, we hope that the voluntary initiative will have put up to 3,000 people in place by the end of 2007. We must work through the issues with various categories where specific questions arise because of the traditional culture and background of the organisation or the fact that it was not involved in previous initiatives, and decide how to proceed with them. That is the position, and the progress report from the decentralisation implementation group at the end of June is the latest full assessment.
Does the Minister have an economic or financial assessment of the cost of so many significant sections or semi-State bodies with specific expertise refusing to move, given the Taoiseach's guarantee that decentralisation is voluntary and that people may stay in Dublin? Unless a review takes place, are we not heading for a repeat of the Cahirciveen situation regarding the Legal Aid Board where essentially there is a headquarters in Dublin and another in Cahirciveen? Interestingly, in the recent decentralisation moves, all the staff in Cahirciveen asked to be transferred to Killarney as part of their response to decentralisation. Will the Minister cost the impact of that in terms of the loss of effectiveness in the public service? In the case of development co-operation, as the Minister is aware people have to agree to transfer every three to five years to an overseas posting for up to four years on average, yet we are asking families in that situation to be trilocated, so to speak, to Dublin, Limerick and overseas.
The Deputy must conclude.
Has the Minister costed the impact of that and will he agree that a financial and management review is essential? Has the Minister read the risk assessment report on this area?
We have exceeded the time.
Within Departments there will be certain assessments or views as matters stand in regard to issues but the Government has brought forward this initiative. We are committed to it. Previous coalition Governments, in which Fine Gael and Labour were involved, halted the decentralisation programmes and then cancelled them. When we returned to office in 1987 we reactivated them with great success. Far from compromising the effectiveness of the service, it has been a very good innovation within the service.
If it is properly planned.
We must move on to the next question.
The historical position of those parties has been to oppose decentralisation at all costs.
No. On a point of order, the Labour Party is in favour of properly planned——
We must proceed to Question No. 51.
——costed and managed decentralisation, not the shambles the Minister is overseeing.
The record of the Deputy's party in office is to the contrary.
On a point of order, the record of the Labour Party in office on decentralisation is that we were involved in hugely successful decentralisation moves throughout the country with the Department of Social Welfare, the Revenue Commissioners——
The Chair has called Question No. 51.
The Deputy is raving.
——and other Departments.
The Deputy is a constant critic of decentralisation.
51 Mr. Connolly asked the Minister for Finance if he will consider the indexation of tax bands and thresholds with a view to protecting taxpayers from inflationary pressures; and if he will make a statement on the matter. [39141/05]
Different countries make different choices on this matter. We choose for good reasons not to index the bands and credits and to deal with each budget with a clean slate, as it were. In this way, the Government can make unconstrained choices in determining priorities in taxation and spending and have the resources to address these appropriately. That is the essence of what government is about.
I am sure the Minister will agree that there are a number of workers who appear to be in a permanent state of confusion regarding their pay. They are earning much more money yet they are still no better off. They are constantly playing catch-up and never appear to gain any benefit from increases in pay. I am sure the Minister will agree that this is due to hidden costs, one of which is indexation. The Minister referred in his reply to other countries making different choices but Ireland should examine the way the United Kingdom operates. Its tax bands are indexed——
A question please, Deputy.
Will the Minister examine the position of our near neighbour regarding the benefits of the indexation order of 1987 for workers in the UK? Will he agree that order was brought in for good reason in a time of high inflation? Will he agree also that in 2002, one in four workers were in the top rate of tax but now one in three workers are in the top rate of tax? That represents an extra 160,000 people, although 40,000 of those are new jobs. Will the Minister agree also that a promise was made under Sustaining Progress that only one in five people would be in the top tax bracket and 80% would be in the lower bracket but that now 66% are in the lower tax bracket, which is unfair?
Will he agree also that the consumer price index is 8% higher now than it was in 2002 yet the threshold for the higher tax rate rose only by 5%, in addition to the fact that wages are increasing, driving people more quickly into the higher tax bracket? I am sure the Minister will agree that people are no sooner out of the higher tax bracket when they are driven back into it again. Does he agree that people are put into a higher tax bracket at a relatively low wage base and that they must sit back and watch millionaires use schemes to avoid paying tax?
I do not agree with what the Deputy said. Irish earnings and employment levels have increased significantly since 1997.
I have acknowledged that.
That is illustrated by the 56% increase in the average industrial wage over that period.
I am talking about indexation.
I will come to that. Changes to the income tax regime since 1997 mean that the average tax rate has been reduced at all income levels. For example, after last week's budget, the average tax rate for a single person on the average industrial wage will be 15% compared with 27% in 1997. In this regard, the position is that a single PAYE worker on the average industrial wage has seen their after tax income increase by approximately 44% in real terms since 1997, of which approximately half is due to tax reductions. There has been a 44% real increase in take-home pay for those on the average industrial wage.
Another factor which can influence people's repayment capacity in terms of their commitments is that mortgage interest rates are at historically low levels of 3.3% to 3.65%, down significantly from the rates of 7.1% to 8.85% prevailing in 1997. The prospect of interest rates going higher over the medium term should be kept firmly in mind by borrowers in terms of continuing commitments.
When the Deputy mentioned the number of people, he omitted to take account of the fact that we have taken another 340,000 people on lower incomes out of the tax net. It was one in four when we came into office and it is one in three now. When we examine the structure of our income tax reforms and the move to a tax credit system rather than maintaining a tax allowance system, the Deputy will realise it is a much more difficult proposition to talk about taking people off the top rate in that respect when the tax credits assist people at the lower end, which is a far more socially progressive measure from an income tax point of view. That was the case at the time.
The Minister knew that at the time he made the commitment.
The other point I would make to the Deputy is that the historical problem with paying income tax was how quickly one paid at the top rate. Before we came into office, a person paid 48% tax after the first €19,400 in earnings. That person now has to earn €32,000 before he or she starts paying the top rate, which is reduced by six points to 42%. If the Deputy can find any government in Europe or any predecessor government in this State that was able to do that much that quickly, I will consider his membership of my party.
I will disregard the Minister's last comment.
A free transfer is the inducement.
In 2002, one in four people were in the top rate of tax. Today, the figure is one in three. There was a promise that we would work towards a figure of one in five. Will the Minister not agree we are heading in the wrong direction in terms of top tax bands?
The Deputy should remember that an additional 500,000 people are at work. That is the litmus test of people's satisfaction. I am sure the Deputy knows from visiting his clinics at weekends — it is a nice, competitive constituency — how well this measure is being received.
52 Mr. P. McGrath asked the Minister for Finance his views on the tax overshoot in 2005 and the assumption underpinning tax forecasts for 2006; and the reason taxpayers are having to pay so much more than forecast. [39234/05]
The expected surplus in tax revenues in 2005 was recently estimated at €1.8 billion or 4.8%. At the end of November total tax revenues were €36,879 million, which was €1,722 million or 4.9% ahead of profile. The receipts include €489 million from the main special investigations of the Revenue Commissioners, which was €294 million higher than expected for the period. Excluding the impact of these one-off receipts, taxes were 4.1% above profile.
The main excesses were on VAT, stamp duty, capital gains tax and excise. This is due to strong growth in the domestic economy and, in particular, in personal consumption expenditure, the volume growth in which is currently estimated at 5.3% for this year. The continued buoyancy of the property market is also a contributory factor in tax revenues being ahead of target. Income tax, excluding the impact of one-off receipts from Revenue's special investigations, was broadly on target, while corporation tax was close to €300 million below profile.
The methodology for forecasting tax revenues generally is based on forecasts of the level and composition of economic activity, which is determined by many factors and is subject to both national and international shocks. Forecasting economic activity, on which forecasts of tax revenues are largely based, is not, therefore, an exact science. Tax forecasts can also be influenced by factors and considerations other than the general level of economic activity.
One main reason we are receiving more in tax than we had forecast is that our tax and economic policies have put more money into the pockets of taxpayers who are spending and investing this extra money as they see fit. This extra spending and investment yields extra taxes.
How could the Minister get it so wrong? How could estimates for tax returns have been so far off target in recent years? In 2004, there was a projected rise of €1.6 billion in extra tax take but the actual tax take turned out to be €4 billion. The Minister was off target by 140%. The expected increase in 2005 was €1.8 billion and, as the Minister just mentioned, the actual figure will be approximately €3.7 billion. How did the Minister end up being 100% off target?
I am thankful that I am off target in a positive sense.
The Minister explained the formula he used to calculate the figure, which is obviously not working. He should go back to the drawing board. In 2003, it was forecast that capital taxes would fall by 23%, a figure of €604 million, but they rose by €1.2 billion.
This occurred because our economy was so successful.
In 2004, it was forecast that there would be an increase of €25 million in capital taxes but the actual increase was €1 billion. How far off target will the Minister's estimates for 2006 be? Will he revise them at this stage? This additional tax take is coming from families and businesses which are obviously paying more tax than they need to for this country to survive. The average tax take from a family has increased from €28,000 in 2002 to a projected figure of €37,500 for 2006. Given these overruns, it is obvious the Minister should be doing a better job and putting more tax back into the pockets of families.
I am glad to have this opportunity to deal with the bogus statistic that Fine Gael has been parroting for some time. It takes the total tax take, divides it by the number of households and then states that the burden of taxation has increased, which is nonsense. Every individual in the tax system has paid less tax in terms of average tax taken on income after this and previous budgets. Nobody in the tax system has lost out in this regard. Fine Gael's suggestion that everyone loses out flies in the face of reality.
Corporation, businesses and excise taxes, VAT, stamp duty and capital gains tax have all increased due to the level of economic activity. When one examines the components of growth, one can see that domestic demand has increased. A total of 90,000 more people are working, of which 71,000 hold full-time jobs. One would expect Fine Gael to welcome such a development. This is the litmus test of the success of our policies. If, on the basis of a total tax take of €36,000 million or €37,000 million, one's projections are off target by 2%, it is a relatively large figure. I will happily accept criticism from the Opposition over the fact that our economy is so successful that we have record numbers of people at work and more people providing greater tax revenues for the Exchequer, on the basis of a reduced average tax take for workers.
The Minister appears to forget that, when someone fills his or her car with €40 of petrol, he or she is making a present of €25 to the Minister. These are real people with real families and real households. He forgets that when a person buys a new car costing €22,000, he or she makes a present of €8,500 to the Minister. He also forgets that when a young couple buys a house costing €300,000, they make a present of €100,000 to the Minister.
Did the Deputy say a present?
These are real people and real families paying real taxes. Business people who pay tax also belong to households and families. The number of households is increasing substantially. I acknowledge and welcome the fact the number of people at work is also increasing. However, there has been a gross underestimate of the tax take in recent years. This estimate should be closer to the actual figure and, in that context, the extra tax could be passed on to families, individuals and households, rather wasted.
A figure of €900 million was returned to taxpayers. What part of this does Deputy Paul McGrath object to? A figure of €1.12 billion went to recipients of social welfare payments. What part of this money was wasted?
What about the €200 million spent on the PPARS system?
What part of the €150 million that went to elderly people was wasted?
What about the €50 million that was spent on electronic voting?
Is the €300 million that will go into a strategic innovation fund a waste or an investment in our future?
What about the €170 million spent on PPARS?
Fine Gael should wake up and smell the roses. It is living in one of the most successful economies in the world. The Opposition cannot stand the fact that our policies are working. It is driving them nuts.
The Minister will discover the truth when he meets the people and his constituency colleague tops the poll in the next general election.
I have met with people in my constituency. Everyone smiled at me all the weekend. Fine Gael people walked up to me and thanked me. They are great pals of mine.
That is not the case in my constituency. They are not smiling at me.
I cannot win with the Labour Party.
What about the Progressive Democrats? What are they doing?
I never before received such a reception. The Deputies should accompany me on my trip to Mullingar next weekend because it will help them.
53 Ms Burton asked the Minister for Finance if his Department have received representations from the US authorities regarding the tax status of US companies operating in this jurisdiction; his views on the descriptions of this country in sections of the US media as a tax haven; his response to these descriptions; and if he will make a statement on the matter. [39250/05]
I have received no such representations. Furthermore, Ireland cannot be regarded as a tax haven. We have a comprehensive taxation system covering income, capital and indirect taxes. In addition, Ireland has 44 tax treaties in place, a system of full exchange of information and proper regulation of activities to the highest standards.
Finally, I again emphasise that companies locate here for a variety of reasons and, in this regard, Ireland offers many advantages to US investors such as access to the European Union, a well-educated workforce, political stability and an enterprise-friendly administration.
Does the Minister share the IDA's view that over-aggressive use of Ireland with regard to tax planning by multinationals could adversely affect our capacity to attract inward foreign investment, particularly jobs related to the knowledge economy? Does he share the views of the president of the American Chamber of Commerce in Ireland that the description of Ireland as a tax haven is a misrepresentation and potentially damaging to Ireland's reputation as a preferred location for investment? The Minister spoke about tax returns a moment ago. Is he aware that if one strips out the US multinationals and transfer pricing on intellectual property, corporation tax undershot, rather than overshot, the estimates for performance last year? We have yet to receive an explanation for this. This is a very serious issue with regard to the positioning of Ireland as a knowledge economy. Does the Minister agree that US multinationals are locating the purchase of intellectual property rights in this economy, but we are not creating jobs commensurate with those rights? In fact, many of the 91,000 jobs about which the Minister spoke are low paid, minimum wage jobs. I do not want to go back to the dreadful Irish Ferries dispute and the outsourcing and dumping of well paid jobs from this economy, which is the other side of the picture. More than 100,000 people marched in the streets because of their fears for the future.
Many of the jobs to which the Deputy refers are not minimum wage jobs but are excellent, well paid jobs. They are being sought by many other countries throughout the world but we have successfully brought them here. Many of them are from expanding Irish companies that are making a bigger impact than ever before in many competitive markets.
I agreed with the points made by the chairman of the American Chamber of Commerce at the function in question which I attended and addressed. We do not reduce other nations' wealth. Our double taxation treaties, agreed with other countries, use well established arm's length principles. The corporation tax regime produces jobs and revenue that supports public services. The revenue has increased by 250%, from €2 billion to €5.5 billion. We have 44 tax treaties in place, a system of full information exchange and a proper regulation of activities to the highest standards. Ireland maintains a low general corporation tax rate by ensuring a wide tax base and careful prudent management of public finances. The 12.5% corporation tax rate is a general rate and is not focused on any particular segment of Irish industry. Our system is deliberately transparent so that all can see the attractions and benefits to the State. Other countries often have high nominal rates of corporation tax, but mask the true lower rate in deductions and deals with individual firms. We do not go that way.
Ireland is bound by the same rules on State aid, code of conduct and rulings of the European Court of Justice as other member states of the EU. We are fully compliant with both the code and the OECD process. We have acted in the past to amend regimes to close down abuses if they arise and we will do so in the future. The tax treatment of cross-border flows is regulated in accordance with double tax treaties agreed with other countries, using well established principles. They are negotiated according to OECD guidelines set down for this purpose. In general teams, Ireland has a comprehensive taxation system covering income, capital and indirect taxes. In recent years, we have concentrated on lowering the burden on enterprise and employment to encourage economic activity.
One of the Minister's predecessors, Deputy Quinn, brought in the 12.5% rate, which the Labour Party believes has brought a great amount of economic benefit to this country.
IDA Ireland stated that overly aggressive use of Ireland's tax benefit by companies, in an international context, results in little substance or value added activity taking place in Ireland. Marginal benefit to Ireland is not something that is advocated by IDA Ireland. What does the Minister feel about that? I am concerned that our economic strategy is not producing the high value jobs that are essential. Instead, we are concentrating excessively on international property rights being located here without the parallel jobs that the economy should be creating. Today's report suggested that Ireland will go from fourth to 21st place in the creation of high level, knowledge economy, information technology jobs. That is a warning to the Government on its economic strategy.
The idea that we do not have an economic strategy is nonsense. This does not happen by accident. It occurs because we make the right choices. It is true that the Deputy's former leader made an application for a 12.5% corporation tax rate. The work done by Deputy Harney and the former Deputy, Mr. McCreevy, on the application when this Government came into office, as well as the subsequent budgets which were opposed by the Labour Party, enabled us to bring the rate down to 12.5% in three or four years. Sending a letter to the European Union notifying it of the Government's attention to lower the rate to 12.5% does not make the Labour Party a low tax party.
We have a very clear economic strategy. The report entitled Ahead of the Curve was adopted by Professor Eoin O'Driscoll who chaired the group on developing Irish enterprise and on ensuring that the indigenous sector makes its contribution and identifies winners for the future.
We have gone from fourth to 21st.
Interrupting me does not change the facts. The Deputy asked a question and she should allow me the courtesy of giving an answer.
We are bringing forward a strategy under the chairmanship of Mr. Michael Buckley, who is ensuring all the recommendations from Professor O'Driscoll's excellent report are implemented. We are also making serious strategic decisions on the investment in third level education which I announced in this budget and which will be a central part of the next national development plan. We seek to bring about much more investment in broadband and other issues which are critical to the knowledge economy. We want to maintain an overall macroeconomic stance that ensures we remain competitive. We face challenges on competitiveness, as does every open economy. We need to deal with those to maintain the record job creation we have achieved under this Administration. We will implement the strategy successfully for a third term.
Will the Minster bring his running mate with him?
I would like to have one.
